OTTAWA — The federal government was well on its way to reducing operating costs even before introducing new austerity measures in March, the budget watchdog said Monday.

The new report by Parliamentary Budget Officer Kevin Page suggests Ottawa is succeeding with its plan to keep a lid on spending as part of the overall plan to balance the budget over the next four years.

While transfer payments to provinces and individuals for such things as health care, old age security and employment insurance continue to rise, most operating costs — which can be more easily controlled — are being curtailed.

The report, part of the PBO’s regular monitoring of government expenditures, shows that even without the latest initiative unveiled in the March budget to cut operations spending by $5.2 billion and 19,200 public service positions over the next three years, costs were already coming down.

Spending on personnel will be sliced by $700 million — or two per cent — to $38.4 billion this fiscal year, the report says, as result of program reviews launched in 2010 and 2011.

The reduction would be greater but for a $850-million one-time payout of severance benefits to public servants as part of collective agreements.

By the time those cost-cutting measures are completed, the government will have trimmed full-time jobs in the public service by 8,600.

On future cutbacks, the report says information turned over by the government shows that personnel cuts represent only about one-third of the projected cost savings.

The PBO said almost half of the $5.2 billion in cost cuts will be found through back-office efficiencies, such as spending on utilities and supplies, and cuts on legal services, contractors and consultant services.

The rest of the savings will come from cuts to minor transfers such as the grants and contributions file.